Tuesday, September 23, 2008

Under pressure, in Parliament Monday afternoon, Wayne Swan told what appears to be the unvarnished truth.

His answer is remarkable for its straightforwardness, and for the insight it gives into his the fear about what could happen in Australia.

I typed it up without waiting for Hansard.

The new Shadow Treasurer Julie Bishop had just asked him why the government had taken 3 different positions on short-selling in the last 3 days:

"Let's deal with short-selling. Was there any legislation in 12 years from that side of the House on short-selling? No.

We did say earlier in the year that we would move to legislate for disclosure of covered short-selling, and the government has prepared a bill in that area.

But as everybody in the world knows, financial markets melted down last week Mr Speaker.

Financial markets melted down last week.

And in response to that government's around the globe moved to change their position on short-selling. They moved to change their position on short-selling because of the carnage that was going on stock markets - the carnage that was going on stock markets in an environment that was so destabilising it had lost touch with the economic fundamentals of many companies...So there was a very strong case at the end of last week for substantial action on short-selling.

ASIC, the independent regulator determined last on Friday that they would take some further action. And of course what happened after the market closed in Australia on the weekend was that further decisions were taken by other governments international.

A further decision was taken in the United States by the SEC; a further decision was taken in Canada, and in at least 3 other countries decisions were taken.

So over the weekend I conferred with all of our regulators... and I conferred with people right across the financial services sector.

Because having all of those other countries ban short-selling in various forms exposed our market first thing on Monday morning to a wall of funding that could have really had a detrimental impact on many many Australian companies.

So we on this side of House make no apology for the decision of our independent regulator to ban short-selling - a decision they announced late yesterday afternoon. A very important decision in the history of this country.

There is a case for short-selling, but there is not a case for short-selling in the market environment in which we now find ourselves domestically and around the globe.

Because we are a small market and it was simply not possible for us to remain open to short-selling when every other market in the world had closed."